VinaCapital ups PE exposure

A strong exit environment coupled with a growing number of mid-market Vietnamese firms will provide more opportunities for private equity, says Andy Ho, chief investment officer at VinaCapital.

Vietnam-focused asset management firm VinaCapital will increase its private equity exposure to up to 30 percent in the next three to four years, according to Andy Ho, chief investment officer at the firm.

“VinaCapital has always had a 20-30 percent exposure to private equity. Over the last few years, we have decreased that significantly to about 2 percent of our portfolio because we went through a cycle of good exits, delivering average returns of 25 percent of our investments. As a result, our board of directors and shareholders are very happy with us to increase our PE exposure,” Ho told Private Equity International.

He added: “Another reason why the firm wants to increase its PE holding is because Vietnam offers strong exit opportunities. Multinational companies are more open to acquiring businesses in Vietnam rather than growing businesses organically. Because of the M&A opportunity, it is very easy for us to exit through a trade sale.

VinaCapital manages about $1.3 billion of assets across private equity, real estate, infrastructure and bonds. It invests mainly in listed companies that contribute to the growth of the domestic economy.

Its Vietnam Opportunity Fund Limited (VOF), a 2003-vintage vehicle that raised $700 million has been fully invested. Under VOF, VinaCapital has invested in the Airport Corporation of Vietnam, leading dairy company Vinamilk, premium hotel Sofitel Legend Metropole Hotel Hanoi and steel manufacturer Hoa Phat Group. Last month, the firm also completed a $9 million buyout of Ho Chi Minh private healthcare facility Thai Hoa Hospital.

Earlier this month, the firm moved VOF from the Cayman Islands to Guernsey and has switched the fund from listing on AIM to the main market of the London Stock Exchange (LSE), as reported by PEI. The firm said moving to LSE’s main market would raise the profile of VOF and provide access to more institutional investors.

According to a Kroll report, private equity investment in Vietnam since 2011 has leaned towards injections of growth capital to help local firms expand. While private equity investment dropped last year from $988 million in 2014 to $260 million in 2015, investment sentiment continues to remain strong in Vietnam as investors set their sights on South-East Asia’s next emerging market, the report said.

Ho added that businesses in Vietnam are becoming more mature, growing bigger, and are now able to absorb much larger amounts of capital of $10-40 million quite easily.